From Sunset to Green Rise

At the end of 1H2014, the Dubai Statistics Center (DSC) estimated that the GDP contribution of the electricity, gas, and water sector was some 1.8%, well behind the big hitters in the Emirate’s economy, including retail, manufacturing, and construction. At the head of the Emirate’s energy sector is the Dubai Supreme Council of Energy (DSCE), a government body that functions as a policy development and governance maker for all key energy assets. In terms of energy policy, Dubai is seeking to balance its increasing dependence on imports, especially in terms of natural gas, by developing a more active renewables industry that will help take up the baton.

OIL & GAS

The size of Dubai’s oil reserves is estimated by the US Energy Administration to be some 4 billion barrels. While crude oil production hit highs of 410,000 bpd in 1991, production has been wound back over the years, with the Emirate expected to sunset as an oil and gas producer by 2030. The onshore Margham field is the centerpiece of the Emirate’s ongoing production, while four offshore fields, Fateh, Southwest Fateh, Falah, and Rashid, contribute to the mix. In 2010, oil and gas was discovered at the Al Jalila field and brought in to bolster the estimated 100,000 bpd the Emirate produces. Dubai is estimated to hold 113.3 billion cubic meters (bcm) of natural gas reserves, though all of the production is devoted to serving the needs of Dubai’s growing population.

In October 2014, the Dubai Petroleum Establishment (DPE) announced new gas discoveries at its offshore Fateh field. The field has been in production since 1966, and is one of the Emirate’s oldest production zones. Studies are to be conducted in 2015 to determine the size and viability of tapping this newly discovered sweet methane reservoir, unusual in an area more traditionally associated with sour gas formations. In total, Dubai’s fields are estimated to produce some 4 million cubic meters of natural gas per day. Despite Dubai’s reserves, in order to feed its need for natural gas and electricity generation, the Emirate is reliant on the Dolphin Energy pipeline, receiving on average 20.67 million cubic meters per day from Qatar, with other feedstock being contributed by the neighboring emirates of Abu Dhabi and Sharjah in more limited quantities.
At the heart of Dubai’s oil and gas industry, whether for production or distribution, is the state-owned Emirates National Oil Company (ENOC). In 1999, it opened at 120,000-bpd capacity oil refinery near the port of Jebel Ali, which it expanded to 140,000 bpd in capacity in 2012. Its gas processing plant is capable of processing up to 235 million cubic feet per day, while its methyl-tertiary butyl ether (MTBE) plant, an additive to unleaded petrol, is rated at 500,000 ktpa, according to ENOC estimates from 2014. Through its Horizon terminal subsidiary, ENOC’s Jebel Ali facility has a 54,401 cubic meter capacity spread over 59 tanks. As well, EPPCO International Limited (EIL), a joint venture between Horizon and Chevron, offers a more substantial 936,755 cubic meters of storage capacity in Jebel Ali. However, ENOC also has extensive facilities in nearby Fujairah, as well as overseas in Saudi Arabia, South Korea, Djibouti, Morocco, and its flagship Singapore operations, which can store up to 1.25 million cubic meters of crude. This is not ENOC’s only foray internationally, with the company owning a 54% stake in Dragon Oil, whose prime asset is the Cheleken field in Turkmenistan. ENOC also plays a key role in Dubai’s fuel distribution sector, running a total of 99 gas stations within the Emirate at end-2014, as well as numerous convenience stores, food and beverage facilities, and auto repair and maintenance centers. Over the past few years, ENOC has been retreating from its retail operations in other markets in the UAE due to their limited profitability, though recent falls in global crude oil prices will act as a buffer for the company’s Dubai outlets. In March 2015, ENOC appointed a new CEO, Saif Humaid Al Falasi, who is looking to diversify the company’s revenue streams and increase its presence in the international market.

However, Dubai’s exposure to the oil and gas industry is not limited to domestic interests alone. Over the years, the Emirate has grown to become a major regional and global player in the oil and gas services industry, with the Jebel Ali Free Zone (Jafza) being central to its prominence. In November 2014, some 830 foreign companies in the petrochemical, oil and gas, and related mechanical sectors had operations within Jafza’s facilities, with 43% covering oil equipment, 31% involved in chemical products, and 21% providing oil and gas services, while 5% were in the glass, plastics, and rubber category. Over 2013, Jafza estimated that these companies had generated over $14 billion in trade and services, making the city one of the go-to places in the Gulf region for foreign oil services providers.

ELECTRICITY & WATER

Dubai Electricity and Water Authority (DEWA) has been working hard to both keep up with the growing demands of business and residents, and ensure that it acting in a responsible way toward the environment. At end-2014, DEWA reported 11 non-renewable power-generating facilities in the Emirate, with a combined installed generating capacity of 9,656 MW in the Jebel Ali and Aweer regions, as well as a 13 MW solar park. Of the installed capacity, 7,104 MW of capacity are from gas turbines, with the remaining 2,542 MW coming off of steam turbines. Peak demand was estimated at 7,233 MW over 2014, with the summer months requiring as much as 7,500 MW in generating capacity to keep consumers satisfied. While Dubai still has a considerable amount of unutilized generating capacity at present, should current usage growth rates continue it will need to construct more capacity to meet demand. Over 2014, DEWA reported a system energy requirement of 39,599 GWh, up 5.36% on the same figure for 2013. DEWA also acts as the main transmission and distribution company in Dubai, boasting over 28,000 substations and some 27,000km of cabling. On the retail side, DEWA reported that in terms of electricity consumption, commercial users came in first at 47.89%, residential users made up 28.2%, institutional and other users formed 8.47%, power stations and related desalination facilities used 8.45%, while industrial operations consumed the remaining 6.99%.

As well as providing electricity, the 7,801 MW of installed generators located in the Jebel Ali area function as desalination plants, having the capacity to produce 470 million gallons per day (migd). In 2014, annual peak water demand came in at 216 migd, up 6.76% in YoY terms. In annual terms, desalination plants provided the Emirate with 106,184 million gallons of water, well above the 498 million gallons provided by underground aquifers. Residential users were responsible for 80.65% of water demand for 2014, with commercial enterprises taking the next largest slice at 18.64%, while industrial and non-commercial institutions represented just 0.71% of remaining water use.

In 2014, the DSCE released the Dubai Integrated Energy Strategy (DIES) 2030 report, a detailed envisioning of the Emirate’s future power and water options. In terms of improving the generation mix, the report has targeted a move away from the current near total reliance on natural gas for generation. Overall, the report calls for natural gas generation to fall from some 95%-plus of generating capacity to 71%, for clean coal to make up 12%, while the remaining will be generated by nuclear energy (12%), and solar plants (5%). As well, the Emirate is targeting a fall in energy demand of 30% to ensure a higher level of environmental sustainability and meet carbon emission goals. The government is examining ways to reduce electricity consumption by all main users, with commercial and residential consumers key targets, while encouraging the use of installed solar panels to reduce the reliance of consumers on DEWA’s generation matrix. As such, solar is being pushed as the main potential source of renewable energy, with the 13 MW solar plant inaugurated in 2013 being just the first step.

In November 2014, a new 100 MW installment of the Mohammed bin Rashid Al Maktoum Solar Park was brought to tender, with DEWA accepting the bid of Saudi company ACWA Power to provide electricity at the lowest rate in the solar industry so far, at $5.98 per kWh. DEWA later doubled the size of the initial contract to 200 MW for installation by 2017, with ACWA Power tipped to be ready to take on this enormous challenge. The Mohammed bin Rashid Al Maktoum Solar Park is at the core of Dubai’s efforts to see solar energy take up to a 5% share of the Emirate’s generating capacity, and thus reduce its reliance on natural gas fired power plants. Once complete, the solar park will generate 1,000 MW of clean energy when completed in 2030. As well, the solar park will cover some 4.5 sqkm of desert, and form one of the largest facilities of its kind.

By contrast, Emirates Gas (EMGAS), ENOC’s retail gas subsidiary, is looking to team up with Dubai Municipality to recover methane gas from sewage operations so as to provide compressed natural gas (CNG) to up to 15,000 vehicles per day in Dubai. EMGAS has been at the forefront of introducing CNG into the Emirate’s fuel mix, with fleet users such as Emirates Airlines, DP World, the Roads and Traffic Authority (RTA), and Dubai Municipality converting some of their vehicles over to the more environmentally friendly fuel. These initiatives mark a more sustainable ecological outlook for Dubai over the long term.